DAX Forecast May 14, 2014, Technical Analysis

The DAX gapped at the open on Tuesday, touching the very highs of the marketplace that we saw printed back in January. We believe that the €9800 level will eventually be broken to the upside, and that the market should head to the €10,000 level. Since we gapped at the open on Tuesday, and formed a shooting star, we believe that this market could very easily pullback, but should find plenty of support all the way from here to the €9700 level. On top of that, there’s a significant amount of support all the way down the €9600 level which should begin significant support below as well.

In fact, we see that there is a significant amount of support all the way down to the €94 level, and as a result we feel that the DAX will ultimately go so much higher. In fact, you could make a bit of an argument for a massive inverse head and shoulders, which of course is a very bullish sign. Above the €9800 level, there should be a fairly clear shot the €10,000 based upon the longer-term charts. That being the case, if we sell off from here it’s going to be very difficult to short the market, simply because of all of the bullish pressure that we’ve seen over the last couple of weeks.

In fact, we actually prefer to see this market pullback, as it should offer plenty of perceived value, and we believe that the market will notice this time and time again. This should continue to push the DAX higher given the longer-term proclivity of positivity, and the fact that the German economy is considered to be one of the more “safe” bets that we have available to us in the European Union. The German economy continues to be the main driver of European growth, although we have to admit it’s not as impressive as it has been in the past.

On top of that, keep in mind that the ECB may very well continue to loose monetary policy. If they do that, that should have money flowing into the stock markets. Obviously, when it comes to Europe, Germany’s the first place money looks to go.